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KELLEY DRYE & W ARREN llpA LiMITED LIABILITY PARTNERSHIP
WASHINGTON HARBOUR, SUITE 400
3050 K STREET, NW
WASHINGTON, D.C. 20007-5108
NEW YORK, NY FACSIMILE
LOS ANGELES, CA (202) 342-8451
CHICAGO, iL WWW, kelleydrye.com
STAMFORD, CT(202) 342-8400
PARSiPPANY, NJ
EDWARD A. YORKGiTiS, JR,
BRUSSELS. BELGIUMDIRECT LINE; (202) 342-8540
EMAIL: [email protected] OFFICES
MUMBAI. INDIA
November 18, 2015
Via ECFS
Ms. Marlene H. Dortch SecretaryFederal Communications Commission 445 12“^ Street, SW Washington, D.C. 20554
Connect America Fund. WC Docket No. 10-90Re:
Dear Ms. Dortch:
On November 16, 2015, Heather Burnett Gold, President/CEO, Fiber to the Home Council Americas (“Council”), Stan Fendley, Director, Legislative and Regulatory Policy, Coming, and the undersigned, Edward A. Yorkgitis, Jr., Kelley Drye & Warren LLP, Counsel to the Fiber to the Home Council, met with Nicholas Degani, Legal Advisor to Commissioner Ajit Pai. The purpose of the meeting was to discuss the Connect America Fund (CAF) Phase II competitive bidding process and the order on circulation to establish a framework for that process.
The Council understands the Commission is considering establishing for the competitive bidding process broadband performance categories to distinguish bidders and potentially provide a preference for bidders that, should they win, will deploy all-fiber networks to eligible (unserved) areas. The Council submits this proposal is sound because: fiber is the most superior technology with which to provide high broadband performance service; fiber is the choice of consumers and businesses in urban areas; fiber confers tremendous economic benefits on communities and indiviudals; and fiber will provide the Commission with a superior, or at least equivalent, return on its CAF investment when compared to other wireline technologies. In the meeting. Council representatives focused on this last aspect and presented the attached presentation, which reviews the business model the Council developed to compare the financial returns from investments in all-fiber networks with the returns from investments in VDSL networks. The results from running that model demonstrate that all-fiber networks produce a
KELLEY DRYE & WARREN l l p
Ms. Marlene H. Dortch November 18, 2015 Page 2
greater return over the life of the CAP II competitive bidding program and an even greater return when evaluated over a longer period.
All-fiber networks have proven in the lab and in the field to provide the highest broadband performance capabilities, and they will do so for decades. In effect, all-fiber networks provide the type of frictionless and future-proof broadband service that consumers, businesses, and institutions are increasingly demanding as their bandwidth needs soar. This verity is well-known to the Commission. It was the basis for the Commission’s decisions to expand E-rate support for fiber deployments and to obtain a committment from AT&T to deploy fiber to more than 12 million households. The market also is reflecting the demand for all-fiber networks, as all types of providers are increasing their fiber deployments and the market share for DSL plummets. The greater value of all-fiber networks is further demonstrated by the economic benefits that they bring to communities and individual households.^ We have reached the tipping point for all-fiber networks, and consumers in virtually all areas of the country should be able to reap their benefits.
All-fiber deployment also is a sound financial investment for the Commission’s CAT program. Market events in urban areas make this clear, and providers that once thought there was a path from DSL to VDSL to all-fiber are finding it is less financially viable and are turning to invest today in all-fiber networks. The reasons are straightforward. First, cable competitors are making 100+ Mbps serivce a standard offering, and these competitors are moving to all-fiber networks. Second, as they access more video content over multiple devices, consumers are demanding higher speed broadband service. Third, a significant part of the DSL build, primarily related to the electronics, will need to be scrapped when the provider eventually moves to FTTP, while all the fiber costs will still need to be incurred.^
The financial model developed by the Council examines this final point - the financial outcomes of all-fiber and DSL investments - and it demonstrates that over the 10-year
1 See “Early Evidence Suggests Gigabit Broadband Drives GDP,” prepared by the Analysis Group for the FTTH Council (September 2014). A link to the study may be found at http://www.ftthcouncil.org/p/bl/et/blogid=3 &blo gaid=3 05 (last visited November 17, 2015); see also “Study Shows Home Values Up 3.1% with Access to Fiber,” FTTH Council Blog Post, dated June 29, 2015, found at http://www.ftthcouncil.org/blog/studv- shows-home-values-up-3.1 -with-access-to-fiber (last visited November 17, 2015).These “scrapped” facilities include DSLAM ports and modems and any upgrade to copper facilities. There also are other costs that will be “lost,” including labor costs for powering the street cabinets, additional provisioning cost, project management cost, and IT systems cost.
2
KELLEY DRYE & WARREN l l p
Ms. Marlene H. Dortch November 18, 2015 Page 3
term of the program, an investment in an all-fiber network has a higher net present value than an investment in a DSL network. Even assuming that the financial returns from deploying the technologies are comparable, the choice still should be to provide support for all-fiber networks because they enable far superior performance and are future-proof
This letter is being filed electronically pursuant to Section 1.1206 of theCommission’s rules.
Respectfully submitted.
du>1r D^OEdward A. Yorkgitis, Jr. Kelley Drye & Warren, LLP 3050 K Street NW Washington, D.C. 20007 202-342-8540 [email protected]
Counsel for the Fiber to the Home Council Americas
Attachment
Nicholas Deganicc:
Conn
ect A
mer
ica
Fund
: Pha
se II
Co
mpe
titiv
e Bi
ddin
g Pr
oces
s and
the
Fina
ncia
l Val
ue o
f Fib
er D
eplo
ymen
t
Nov
embe
r, 20
15
Copy
right
© 2
015
FTTH
Cou
ncil
Amer
icas
. All
right
s re
serv
ed.
2Co
pyrig
ht ©
201
5 FT
TH C
ounc
il Am
eric
as. A
ll rig
hts
rese
rved
.
Ther
e ar
e bo
th e
cono
mic
and
pol
icy
reas
ons t
o su
ppor
t FTT
P in
the
Phas
e II
com
petit
ive
bidd
ing
proc
ess
•Th
e FT
TH C
ounc
il un
ders
tand
s the
Com
miss
ion
is co
nsid
erin
g pr
ovid
ing
a pr
efer
ence
in th
e CA
F II
com
petit
ive
bidd
ing
proc
ess f
or a
pplic
ants
that
will
dep
loy
FTTP
infr
astr
uctu
re to
elig
ible
are
as in
the
10 y
ear p
erio
d fo
r the
pr
ogra
m
•Th
e Co
unci
l sup
port
s the
se p
ropo
sals
for t
wo
prim
ary
reas
ons:
–Fi
ber i
s uni
vers
ally
ado
pted
as t
he p
refe
rabl
e te
chno
logy
to p
rovi
de h
igh
perf
orm
ance
bro
adba
nd se
rvic
e ov
er m
any
deca
des (
“fut
ure-
proo
f”) t
o m
eet i
ncre
asin
g co
nsum
er d
eman
d
–In
vest
men
t in
fiber
is p
refe
rabl
e to
inve
stm
ents
in “
inte
rim”
tech
nolo
gies
from
a fi
nanc
ial s
tand
poin
t.
Prov
idin
g a
pref
eren
ce fo
r fib
er d
eplo
ymen
t is a
fina
ncia
lly so
unde
r way
to sp
end
CAF
fund
ing
•To
dem
onst
rate
the
finan
cial
val
ue o
f fib
er, t
he C
ounc
il de
velo
ped
a m
odel
com
parin
g th
e ne
t pre
sent
val
ue
(NPV
) of F
TTP
and
VDSL
dep
loym
ents
with
an
even
tual
upg
rade
to F
TTP
•Gi
ven
the
curr
ent g
row
ing
rate
of c
onne
ctio
n sp
eeds
and
the
even
tual
nee
d to
upg
rade
DSL
faci
litie
s with
in a
ce
rtai
n nu
mbe
r of y
ears
, the
agg
rega
te co
st o
f FTT
P w
ill b
e le
ss th
an D
SL o
ver t
he lo
ng te
rm
•Pr
efer
ence
for F
TTP
inve
stm
ent i
s fur
ther
dem
onst
rate
d by
mar
ket e
vent
s in
mor
e ur
ban
area
s whe
re p
rovi
ders
ar
e in
crea
singl
y fa
vorin
g FT
TP d
eplo
ymen
ts o
ver D
SL. R
ural
mar
kets
shou
ld h
ave
com
para
ble
tech
nolo
gy a
s lon
g as
the
diffe
renc
e in
subs
idie
s is r
easo
nabl
e
Exec
utiv
e Su
mm
ary
3Co
pyrig
ht ©
201
5 FT
TH C
ounc
il Am
eric
as. A
ll rig
hts r
eser
ved.
FCC
Broa
dban
d Sp
eed
Defin
ition
050100
150
200
250
300
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
OO
KLA
Typi
cal u
rban
spee
ds w
ill g
row
subs
tant
ially
ove
r the
nex
t 10
year
s driv
en b
y he
avily
de
ploy
ed F
TTP
and
new
app
licat
ions
US
Broa
dban
d Sp
eeds
Sour
ce: C
isco,
OO
KLA,
Exp
eria
n, F
CC, R
VAUS
Dow
nloa
d Sp
eeds
, Act
ual &
For
ecas
t
Average Download Speed (Mbps)
75 M
bps b
y 20
20
Ove
r 250
Mbp
s by
2025
4
•U
S br
oadb
and
spee
ds
are
expe
cted
to g
row
dr
iven
by
Goog
le F
iber
, AT
&T
Giga
Pow
er,
Cent
uryL
ink,
DO
CSIS
3.
x de
ploy
men
ts
•CA
F re
quire
s app
lican
ts to
bu
ild to
10/
1 M
bps w
hich
is
low
er th
an F
CC’s
cur
rent
de
finiti
on o
f bro
adba
nd.
•M
ultip
le d
evic
es, a
nd
high
er q
ualit
y st
ream
ing,
i.e
. Net
flix’
s 4K
stre
amin
g re
quire
hig
her s
peed
s (2
5Mbp
s)•
Toda
y, 2
6M h
ouse
hold
s alre
ady
pass
ed b
y fib
er•
In 2
020,
49M
num
ber o
f hou
seho
lds w
ill b
e pa
ssed
by
1Gbp
s FTT
P in
the
US
Actu
alFo
reca
st
4Co
pyrig
ht ©
201
5 FT
TH C
ounc
il Am
eric
as. A
ll rig
hts r
eser
ved.
VDSL
, 25
Mbp
s
Give
n fa
st g
row
ing
spee
d re
quire
men
ts, a
ny V
DSL
upgr
ade
to e
xist
ing
copp
er p
lant
w
ould
hav
e to
be
repl
aced
with
FTT
P w
ithin
the
next
10
year
s•
In o
rder
to m
eet p
arity
with
urb
an n
etw
orks
, upg
rade
to F
TTP
will
be
requ
ired
FTTP
Upg
rade
Per
iod
-Con
sum
er P
ersp
ectiv
e
100
Mbp
s
Connection Speed (Mbps)
80 M
bps
25 M
bps
2015
2020
2025
VDSL
, 100
Mbp
s*
FTTP
, >1G
bps
Year
US
Conn
ectio
n Sp
eed
Evol
utio
n vs
. Acc
ess T
echn
olog
y Ca
pabi
litie
s
Sour
ce: C
isco,
OO
KLA,
Exp
eria
n, F
CC
Com
men
ts
•W
ithin
5 y
ears
we
expe
ct a
ny c
omm
on
VDSL
spee
ds in
urb
an
area
s to
be in
exc
ess o
f FC
C’s 2
5 M
bps
requ
irem
ent
•W
ithin
10
year
s, w
e be
lieve
that
cur
rent
ne
eds w
ill re
quire
an
upgr
ade
to F
TTP
1 Gb
ps
250
Mbp
s
2015
:25
Mbp
s
2020
:75
Mbp
s
2025
:25
0 M
bps
Bond
ed V
ecto
red
VDSL
, 200
Mbp
s20
0 M
bps
* At
a 1
,000
ft d
istan
ce w
ith V
DSL v
ecto
ring
5Co
pyrig
ht ©
201
5 FT
TH C
ounc
il Am
eric
as. A
ll rig
hts
rese
rved
.
OPE
X Sa
ving
s
Annu
al O
pex
savi
ngs f
rom
FTT
P de
ploy
men
ts v
ersu
s DSL
dep
loym
ents
hav
e be
en
repo
rted
by
oper
ator
s (no
tabl
y Ve
rizon
) to
be a
s hig
h as
$11
0 in
urb
an a
reas
•
We
belie
ve $
100
per l
ine
per y
ear i
n op
erat
ing
expe
nse
savi
ngs w
ill b
e re
ason
able
in ru
ral a
reas
cov
ered
by
CAF
II
Com
men
ts
•Pu
blic
ally
ava
ilabl
e st
atem
ents
from
ope
rato
rs th
at
have
tran
sitio
ned
to F
TTP
and
num
erou
s oth
er
stud
ies i
ndic
ate
that
FTT
P pr
ovid
es si
gnifi
cant
op
erat
iona
l cos
t ben
efits
due
to lo
wer
faul
t rat
es
and
low
er m
aint
enan
ce w
ith fe
wer
act
ive
com
pone
nts i
n th
e ne
twor
k•
Sour
ces i
nclu
de:
Ope
x Sa
ving
s Ben
chm
arks
$110
$99
Annu
al O
pex
Savi
ngs
($/l
ine/
year
)O
pera
tor
Sour
ce: V
erizo
n Ea
rnin
gs C
all S
tate
men
ts b
y Do
reen
Tob
en, f
orm
er V
erizo
n CF
O (S
epte
mbe
r and
Dec
embe
r 201
5), B
ell A
liant
stat
emen
ts a
t 201
1 FT
TH C
onfe
renc
e pa
nel,
Hiaw
atha
Bro
adba
nd
prot
ectiv
e or
der a
s ref
eren
ced
in B
road
band
Ava
ilabi
lity
Gap
(FCC
, 201
0)
6Co
pyrig
ht ©
201
5 FT
TH C
ounc
il Am
eric
as. A
ll rig
hts
rese
rved
.
$1,5
35
$2,0
00
$2,5
00
$3,7
00
10 M
bps
25 M
bps
100
Mbp
s1
Gbp
s+
A 2-
stag
e VD
SL u
pgra
de is
alw
ays m
ore
expe
nsiv
e in
nom
inal
term
s tha
n an
one
-off
FTTP
dep
loym
ent w
ithou
t any
furt
her u
pgra
de n
eeds
Upg
rade
Cap
ex
Sour
ce: B
arry
Tel
epho
ne C
o., F
CC
Benc
hmar
ks fo
r Upg
rade
Cap
ex b
y Te
chno
logy
in L
ow D
ensi
ty A
reas
1
Dow
nstr
eam
Sp
eed
Thre
shol
d:
Enab
ling
Tech
nolo
gy:
Sour
ce:
ADSL
/VDS
LVD
SL2
VDSL
2FT
TP
Deriv
ed fr
om B
arry
Tele
phon
e Co
., Ru
ral
Broa
dban
d Ex
perim
ent
appl
icat
ion
to F
CC, 2
014
Base
d on
ana
lysis
of J
agua
r co
st cu
rve,
ass
umes
50%
of
netw
ork
is fib
er to
the
DSLA
M
Base
d on
ana
lysis
of J
agua
r co
st cu
rve,
ass
umes
70%
of
netw
ork
is fib
er to
the
DSLA
M
Base
d on
Fib
er to
the
Hom
e Co
unci
lAm
eric
as F
CC fi
ling,
20
09
1. Le
ss th
an 5
0 ho
useh
olds
/squ
are
mile
$4,0
00$4
,000
$4,0
00
Upg
rade
to F
TTP
Initi
al D
eplo
ymen
t
7Co
pyrig
ht ©
201
5 FT
TH C
ounc
il Am
eric
as. A
ll rig
hts
rese
rved
.
Capi
tal c
osts
for f
iber
-to-
the-
prem
ises a
re h
ighe
r tha
n up
grad
ing
curr
ent c
oppe
r pla
nt
to V
DSL,
but
ong
oing
ope
ratin
g co
sts f
or F
TTP
are
muc
h lo
wer
than
VDS
L
FTTP
vs.
VDS
L Ca
pex/
Ope
xCo
nsid
erat
ions
Initi
al D
eplo
ymen
t Cos
t*(C
ost t
o Pa
ss a
nd C
onne
ct)
FTTP
Upg
rade
Cos
t on
Yea
r X(D
istrib
utio
n N
etw
ork
&
Conn
ect C
ost)
Annu
al O
&M
Cos
t Di
ffere
nce
(Tru
ck ro
lls, t
roub
lesh
ootin
g, p
ower
an
d co
olin
g, e
tc.)
$3,7
00 /
Prem
$2,0
00 /
Prem
$0 /
Prem
$2,0
00 /
Prem
+ $1
00 /
Year
FTTP
VDSL
Sour
ce: C
arte
sian
Com
men
ts
•U
pgra
de c
ost f
rom
VDS
L to
FTT
P in
volv
es d
eplo
ymen
t of l
ocal
net
wor
k,
i.e.,
netw
ork
from
stre
et c
abin
et to
pr
emise
s, a
dditi
onal
pas
sive
(spl
itter
s)
and
activ
e eq
uipm
ent (
OLT
, ON
T)•
Addi
tiona
l VDS
L O
pex
occu
rs u
ntil
the
final
upg
rade
to F
TTP
and
incl
udes
hi
gher
ope
ratio
ns a
nd m
aint
enan
ce
cost
s of
the
outs
ide
plan
t, m
ore
freq
uent
truc
k ro
lls, h
ighe
r cos
t of
trou
bles
hoot
ing
/ cus
tom
er s
uppo
rt,
and
high
er p
ower
con
sum
ptio
n (D
SLAM
vs.
OLT
)•
VDSL
aba
ndon
ed c
apita
l exp
ense
s af
ter u
pgra
de to
FTT
P in
clud
e DS
LAM
s, m
odem
s, la
bor e
xpen
ses
rela
ted
to in
stal
latio
n, c
oppe
r pla
nt
/in-h
ouse
cab
ling
fixin
g, p
rovi
sioni
ng
and
proj
ect m
anag
emen
t
* Ba
sed
on lo
w d
ensit
y ar
eas,
i.e.
< 5
0 HH
/sq.
mile
8Co
pyrig
ht ©
201
5 FT
TH C
ounc
il Am
eric
as. A
ll rig
hts
rese
rved
.
($4,
000)
($3,
000)
12
34
56
78
910
1112
1314
15
NPV
- VD
SL w
ith F
TTP
Upg
rade
NPV
- FT
TP
Give
n th
at u
pgra
des w
ill b
e re
quire
d in
the
futu
re, F
TTP
is al
way
s the
mos
t effe
ctiv
e w
ay to
low
er a
bsol
ute
cost
s and
is c
heap
er th
an V
DSL
whe
n de
ploy
men
t is r
equi
red
with
in 1
0 ye
ars
VDSL
Upg
rade
Vs.
FTT
P Ec
onom
ics
VDSL
vs.
FTT
P Ca
sh F
low
s per
Yea
rVD
SL v
s. F
TTP
NPV
ove
r Upg
rade
Yea
r
Fund
ing
for a
25M
bps
VDSL
pro
ject
with
an
upgr
ade
to F
TTP
befo
re Y
ear 1
0 w
ould
be
less
eco
nom
ical
than
hav
ing
depl
oyed
FTT
P fr
om th
e be
ginn
ing
VDSL
12
34
56
….
x
FTTP
12
34
56
….
Year
VDSL
Cos
t to
Pass
+ C
onne
ct
Addi
tiona
l O
pex
Cape
x for
FTTP
Upg
rade
FTTP
Cos
t to
Pass
+ C
onne
ct
Any
FTTP
Upg
rade
bef
ore
Year
10
has a
low
er N
PV th
an
doin
g FT
TP fr
om th
e st
artVD
SL U
pgra
de Y
ear t
o FT
TP
NPV
Assu
mes
8.5
% c
ost o
f cap
ital1
1 Co
nnec
t Am
eric
a M
odel
use
s 8.5
% co
st o
f cap
ital
Mod
el A
, VDS
L Ye
ar 1
0 U
pgra
de: -
$4,9
20 (n
omin
al)
Mod
el B
, FTT
P: -$
3,70
0 (n
omin
al)
9Co
pyrig
ht ©
201
5 FT
TH C
ounc
il Am
eric
as. A
ll rig
hts
rese
rved
.
FTTH
Cou
ncil
can
cons
ider
a n
umbe
r of p
olic
y su
gges
tions
that
will
nec
essit
ate
fiber
-to-
the-
prem
ises b
uild
-out
s
FTTH
Cou
ncil
Reco
mm
enda
tions
Sour
ce: F
CC P
ropo
sals,
Car
tesia
n
Sum
mar
y
•Be
caus
e ur
ban
conn
ectio
n sp
eeds
will
incr
ease
bey
ond
the
thre
shol
ds
that
can
be p
rovi
ded
by V
DSL,
upg
rade
s to
FTTP
will
be
requ
ired
in th
e fu
ture
•Gi
ven
this,
it is
eco
nom
ical
ly e
ffici
ent t
o up
grad
e to
FTT
P di
rect
ly v
s.
ince
ntiv
ize a
2-s
tage
upg
rade
pro
cess
•VD
SL o
r any
wire
less
bas
ed a
cces
s ne
twor
k w
ill n
ot b
e ab
le to
pro
vide
sp
eeds
to ru
ral a
reas
that
are
suffi
cien
tly co
mpa
rabl
e sp
eeds
to u
rban
sp
eeds
with
in th
e ne
xt 1
0 ye
ars
•La
stly
, the
re’s
cons
ider
able
soci
oeco
nom
ic b
enef
it to
com
mun
ities
by
depl
oyin
g fib
er w
hich
in th
e pa
st h
as b
een
estim
ated
up
to $
500
annu
al
bene
fit p
er h
ouse
hold
in th
e U
S in
volv
ing
e-w
ork,
e-c
omm
erce
, OTT
vi
deo,
e-le
arni
ng, e
-hea
lth a
nd cl
oud
com
putin
g be
nefit
cont
ribut
ions
FTTH
Cou
ncil
Reco
mm
enda
tion
Nec
essa
ry to
hav
e co
mpe
titiv
e au
ctio
n fr
amew
ork
suffi
cien
t pr
efer
ence
for f
iber
so th
at C
AF fu
ndin
g ca
n be
effi
cien
tly
inve
sted
10Co
pyrig
ht ©
201
5 FT
TH C
ounc
il Am
eric
as. A
ll rig
hts
rese
rved
.